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AIRLINE LIBERALISATION AND COMPETITION
THE EU EXPERIENCE
OECD ROUNDTABLE ON AIRLINE COMPETITION
PARIS, 19 JUNE 2014
John B...
1 39700071
The Chicago Convention 1944
 Sovereignty of each State over its airspace
 Permission needed for operation of ...
2 39700071
Treaty of Rome 1957 created a common market
Fundamentally incompatible with the Chicago system
So air transport...
3 39700071
Three “packages” from 1987 to 1992
Gradual total liberalisation of intra-EU access and fares
Common rules on ai...
4 39700071
Art 101 prohibits agreements, decisions and concerted practices preventing,
restricting or distorting competiti...
5 39700071
Art 101 - 2001 fine of €52.5m on SAS and Maersk for market-sharing
- 2010 fine of €799m on 11 airlines for carg...
6 39700071
Merger Reg - some 32 decisions, all approving (often subject to conditions) except
 Ryanair/Aer Lingus (twice ...
7 39700071
Success of liberalisation, made possible by competition
Accompanied by application of competition rules
Allianc...
8 39700071
Slots
 Reg 95/93
 Difficulty of disrupting traditional system
 Marketability
Legacy carriers’ inheritance
Fr...
9 39700071
Liberalisation of EU air transport a great success
An example for other countries and regions, and for extensio...
1,400 1st 290 33
Lawyers and fee
earners worldwide
Law Firm of the Year
Legal Business Awards
2011
Partners worldwide Offi...
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Airline liberalisation and competition the EU experience - John Balfour – June 2014 OECD discussion on airline competition

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This presentation by John Balfour was made during a roundtable discussion on airline competition held at the 121th meeting of the OECD Competition Committee on 19 June 2014. Find out more at http://www.oecd.org/daf/competition/airlinecompetition.htm

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Transcript of "Airline liberalisation and competition the EU experience - John Balfour – June 2014 OECD discussion on airline competition "

  1. 1. AIRLINE LIBERALISATION AND COMPETITION THE EU EXPERIENCE OECD ROUNDTABLE ON AIRLINE COMPETITION PARIS, 19 JUNE 2014 John Balfour - Consultant
  2. 2. 1 39700071 The Chicago Convention 1944  Sovereignty of each State over its airspace  Permission needed for operation of international air services  Network of bilateral air services agreements  Limited capacity and frequency  Single designated airline  Use of particular airports  Both States’ approval of fares  Accompanied by “pooling” agreements between airlines  Aircraft have the nationality of the State of registry  States normally limit ownership of aircraft to their own nationals  Bilaterals normally allow traffic rights to be withheld/withdrawn from an airline not owned and controlled by nationals of its own State THE INTERNATIONAL BACKGROUND
  3. 3. 2 39700071 Treaty of Rome 1957 created a common market Fundamentally incompatible with the Chicago system So air transport policy effectively exempted until the Council decided (unanimously) otherwise 1978 US domestic deregulation 1986 ECJ “Nouvelles Frontières” judgment confirming that the competition rules applied to air transport 1987 Single European Act changing the requirement for unanimity in the Council to qualified majority THE EUROPEAN BACKGROUND
  4. 4. 3 39700071 Three “packages” from 1987 to 1992 Gradual total liberalisation of intra-EU access and fares Common rules on airline licensing  Any applicant satisfying the requirements must be granted a licence  End to monopoly policies in favour of national carriers  Freedom of cross-border establishment/acquisition  Also implementation of competition rules, gradually as regards  Scope  Geographical coverage EU LIBERALISATION
  5. 5. 4 39700071 Art 101 prohibits agreements, decisions and concerted practices preventing, restricting or distorting competition, subject to the possibility of exemption Art 102 prohibits abuse of a dominant position Council Reg 139/2004 requires large concentrations to be notified to the Commission for clearance Art 107 prohibits State aid, subject to the possibility of exemption Council Reg 868/2004 gives the Commission powers re State aid by third countries to their airlines THE EU COMPETITION RULES
  6. 6. 5 39700071 Art 101 - 2001 fine of €52.5m on SAS and Maersk for market-sharing - 2010 fine of €799m on 11 airlines for cargo surcharges cartel - ongoing investigation of Lufthansa/Turkish and TAP/Brussels codesharing arrangements - frequent application in case of alliances (always permitting, but often subject to conditions) Art 102 - 1989 and 1992 Sabena and Aer Lingus refusal to supply cases - 1999 fine of €6.8m on BA re travel agent incentive schemes APPLICATION OF THE COMPETITION RULES AND AIRLINES (1)
  7. 7. 6 39700071 Merger Reg - some 32 decisions, all approving (often subject to conditions) except  Ryanair/Aer Lingus (twice – 2007 and 2013)  Aegean/Olympic (first time – 2011) Art 107 - many cases, generally re restructuring aid  Some held not to involve aid (MEIP/MEOP)  Some permitted, often subject to conditions  Some prohibited - more recently re aid by airports to airlines  2004 Commission decision re Charleroi/ Ryanair  2005 Commission guidelines  2008 CFI judgment annulling decision  2014 revised guidelines and re-opening of Charleroi case APPLICATION OF THE COMPETITION RULES AND AIRLINES (2)
  8. 8. 7 39700071 Success of liberalisation, made possible by competition Accompanied by application of competition rules Alliances - concentration permitted subject to remedies - questionable success of remedies Time taken for investigations - strict timetable sunder Merger Regulation - 4 years for Star Alliance - 8 years since initial investigation into Skyteam - 4½ years for cargo cartel decision – and still not published, almost 4 years later State aid - mixed record, political difficulties - long time for reaction to CFI judgment on Charleroi decision ASSESSMENT
  9. 9. 8 39700071 Slots  Reg 95/93  Difficulty of disrupting traditional system  Marketability Legacy carriers’ inheritance Frequent flyer programmes OTHER BARRIERS TO COMPETITION
  10. 10. 9 39700071 Liberalisation of EU air transport a great success An example for other countries and regions, and for extension Important that accompanied by competition rules Legal and institutional framework for EU, but more difficult in international context CONCLUSIONS
  11. 11. 1,400 1st 290 33 Lawyers and fee earners worldwide Law Firm of the Year Legal Business Awards 2011 Partners worldwide Offices across Europe, Americas, Middle East, Africa and Asia. Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. © Clyde & Co LLP 2014
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